Road upgrade proposal viewed

Ruapehu Bulletin, Volume 11, Issue 528, 22 March 1994, Page 4

Road upgrade proposal viewed

# The article in the Bulletin 1 5 March about the public meeting to discuss the up-grading of the district's roads gives a report of the basic 'proposal'. Mayor Workman's article on page six of the same issue deals with the overall scenario but does not give sufficient detail to enable ratepayers to make a considered judgement on what will be a contentious issue. Having attended the meeting here is my summary of the management submission: □ The Ruapehu District Council will raise a loan of $ 1 6 million to be expended at the rate of $ 1 million per year. The term of the loan is proposed to be 20-years. □ The loan money will be expended on upgrading of district roads and includes seal extension, road widening, corner straightening and improvements to road alignment. □ Debt servicing will cost $80,000 per $1 million. Therefore a sinking fund of 2 per cent will cost $20,000 and interest at 6 per cent will cost $60,000. □ Debt servicing will be funded by a special roading rate. □ Because of low traffic volumes and therefore low benefit-cost ratios, it will be very unlikely to gain any subsidy for the proposed works. □ Roads will be classified into three categories: (A) Main roads to be funded on a district-wide basis. These were stated to be the Pipiriki road and the former SH 40; (B) Local roads to be funded on a north-south roading rate split. These roads to be through roads; (C) No-exit roads. There will be no funding for these roads and any improvements to these will have to be funded by ratepayers and residents on these roads. (For the purpose of the meeting we were told we could disregard this category). Following the submission, questions were taken and further details were elicited. □ Debt servicing will increase the roading rate each year as the next $1 million is drawn. □ An increase in inflation will probably increase the cost of the programme, as the intention will be to adhere to the roading programme. □ Engineering on-costs are approximately 7 per cent, administration on-costs are about 2 per cent. □ A proposed programme of works has been drawn up by management (but was not detailed to the meeting). □ The technical services director is sure that road maintenance will not require an increase in the roading rate for 1994/95. □ Transit New Zealand are currently reviewing maintenance subsidy rates and Ruapehu District Council may or may not retain the present 58 per cent subsidy. □ Ruapehu Construction Limited have been paying dividends of $100,000-$ 150,000 pa to its • sole shareholder Ruapehu District Council. This dividend is absorbed into the general account of council in the annual plan. Commenting on particular points of the above information: □ With interest at 6 per cent and the sinking fund at 2 per cent the special roading rate will need to produce: $80,000 for the 1 st year; $ 1 60,000 for the 2nd year; $240,000 for the 3rd year progressively until the 1 6th year when it will require $ 1 ,280,000, consisting of $960,000 interest and $320,000 sinking fund. This amount will continue until the 20th year when the total debt servicing will reach the totals of $ 1 2,000,000 for interest and $4,000,000 for the sinking fund. The sinking fund will of course be earning interest. These figures assume that interest remains at 6 per cent and minimal inflation. Depending on the terms of the loan and assuming $1 million is repaid annually thereafter, the sinking fund should be exhausted by year 25 and approximately $10 million would have to be reborrowed. Therefore the total loan period would be close to 35 years. □ To service the above debt will require an increase in the special road rate each year for 16

years. □ Engineering and administration on-costs will be about $90,000 per $1 million of programme. □ No forward projections were given on increases which could be needed to fund the subsidised road maintenance programme in the next few years. Items such as: The 58 per cent maintenance subsidy are under review. Any reduction in this figure would have an effect on the roading rate; At present, Transit still fund 100 per cent of revoked State Highways maintenance. □ It seems likely that a portion of Pipiriki Road could be used by an increasing amount of logging traffic in the not too distant future. What capital work would be required and at what cost? I hope this letter helps ratepayers to understand the implications of the proposal which the council is promoting.

D S Bennett,

Raetihi.